Markets

20 renewable energy focus May/June 2008

NEF summit proves a success amidst stock turmoilDURING THE PERIOD 1 FEBRUARY TO 28 MARCH 2008, THE WILDERHILL NEW

ENERGY GLOBAL INNOVATION INDEX NEX FELL A FURTHER 18%, ON TOP OF

THE 15% FALL OF THE PREVIOUS TWO MONTHS. AGAINST THIS BACKDROP,

NEW ENERGY FINANCE HELD ITS INAUGURAL SUMMIT IN LONDON ON 2829

FEBRUARY 2008. THE SUMMIT INCLUDED AN AWARDS DINNER FOR NEW ENERGY

FINANCE’S 2007 CLEAN ENERGY LEAGUE TABLES, NOW IN THEIR THIRD YEAR. TOM

GREENWOOD CASTS HIS EYE OVER THE NEX PERFORMANCE BELOW, WHILE

ALICE HOHLER GIVES HER VIEW FROM THE SUMMIT OPPOSITE.

During the period 1 February to 28 March the WilderHill New Energy

Global Innovation Index fell a further 18%, on top of the 15% fall of the

previous two months. While in the bull market run of 2006 and 2007 the

index consistently outperformed the FTSE and S&P 500, as investor senti-

ment has turned defensive in 2008, sector losses in clean energy have

exceeded those of the major indices, which both lost around 3% and 5%

respectively over the same period.

The only sector in the NEX to impress was power storage – which

comprises mainly advanced battery technologies – gaining 22% on

average, refl ecting the investors’ position that the relatively large market

capitalisations in the sector make it one of the safer places to be in a

downturn. Wind also made small gains, climbing 3.8% on average, indi-

cating the increasing maturity of the industry.

The riskier sectors such as hydrogen and fuel cells (which are treated as one

sector) and solar suff ered, falling 8.6% and 3.8% respectively. Smaller capitalisa-

tions and valuations, based on growth forecasts as opposed to assets or cash

fl ow, are among the factors that may have worried the already nervous

market.

Energy effi ciency companies closed the period down by 3.7%, in contrast

to the previous two months where they had looked some of the more

resilient stocks. Big individual falls from US fi rms Comverge – a smart

metering and power management manufacturer which was down more

than 40% – and grid management company EnerNOC – the period’s worst

performer crashing 67% – dragged the performance down signifi cantly.

The top gainer for February and March was Japan Wind Development,

rising 66%, followed by electronics giant Sanyo Electric. It led the power

storage gainers with a rise of 49%, after announcing it would sell off older

divisions such as its mobile phone business in order to expand its solar

and battery arms.

Unusual in their sector, Capstone Turbine and Power-One (both energy

effi ciency companies) gained 42% and 35% respectively. Capstone bagged

a large order for its energy effi cient micro-turbines and Power-One, which

makes power conversion products for the telecommunications and solar

markets, is beginning to recover after a bad 2007 with a series of board

changes and improved results.

The worst performer was EnerNOC, whose shares plummeted following

the announcement that its Q4 results were far below analysts’ expecta-

tions. The results were followed by the fi ling of a class action lawsuit

against the company over statements made by the management.

Second and third worst performers were Aventine Renewable Energy Hold-

ings and Verbio – US and German biofuel companies, with falls of 46% and

41% respectively. Although biofuel and biomass companies as a whole

stayed fairly stationary during February and March, casualties in this sector

are not hard to fi nd, with rising feedstock prices and increasing political

wariness giving biofuels, in particular, an increasingly unpopular image.

These fi gures do not include NEX’s quarterly re-balancing which took

place on 31 March. Seven companies came in to the index, and four

were removed. Joining the index were UK-based carbon-credit exchange

operator Climate Exchange; Epistar, the Taiwan-listed maker of high-

brightness light-emitting diodes; US waste-to-energy group Covanta

Holding; New York Stock Exchange listed, Chinese biodiesel producer

Gushan Environmental Energy; Sao Martinho, the Brazilian ethanol

Tom Greenwood, Alice Hohler

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renewable energy focus May/June 2008 21

producer; the Frankfurt-listed Centrotherm Photovoltaics, a maker of

manufacturing equipment for photovoltaic cells; and Chinese wind

turbine maker Xinjiang Goldwind Science & Technology.

Leaving the index were Shenzen-listed bioethanol producer Anhui BBCA

Biochemical; Pacifi c Ethanol, the Nasdaq-listed US bioethanol producer;

Verbio, the German biodiesel and bioethanol producer, and UK utility

Scottish & Southern Energy.

New Energy Finance summit

While the NEX was wobbling, New Energy Finance was holding its inau-

gural Summit in London. The Summit included an Awards Dinner for New

Energy Finance’s 2007 Clean Energy League Tables, now in their third year

(see box above, ‘NEF clean energy league tables 2007’).

The landmark event was designed to bring together a select group of

thought-leaders and key investors to debate the implications of the

seismic shifts taking place in clean energy and the carbon markets, as

Governments and companies realise that they must adjust from high to

low carbon energy sources.

150 industry executives and investors from around the world attended

the Summit, designed to be as engaging and participatory as possible.

Panel debates between industry experts were followed by fl oor discus-

sions within each of 25 tables of delegates. Key points from these table

discussions were then summarised in real time before being distilled

centrally and fed back to the room by a recognised industry commen-

tator.

Michael Liebreich, ceo and founder of New Energy Finance, opened the

Summit with a presentation on Financing the Low Carbon Revolution.

New money fl owing into the industry in 2007 was 60% higher than in

2006. Investment has soared from less than US$30 billion in 2004 to

almost US$150bn in 2007, equivalent to 19% of total energy infrastruc-

ture investment. More than half of this – US$84.5bn – went into fi nancing

new renewable energy assets. The wind sector continued to dominate,

attracting just over US$50bn, although solar investment grew strongly in

2007 to US$28.6bn, nearly three times more than in 2006.

However, current investment will have to treble to US$450bn by 2012 if

CO2 emissions are to be brought under control – an ambitious target, but

NEF clean energy league tables 2007

New Energy Finance has ranked the top players in clean energy investing in 2007. This marks the third of its league tables, and each year brings “greater cooperation and disclosure from those in the industry”, according to the company.

Topping the list of venture capital investors as measured in total rounds invested was Good Energies, with 20 in 2007 totalling US$100.6m. The fi rm, which has offi ces in Switzerland, the US, and elsewhere, backed Boston-based wind forecaster Second Wind, UK-based solar systems integrator Solar Century Holdings, and Colorado-based peak load shaving and energy effi ciency company Ice Energy, among others.Goldman Sachs topped two tables. The Wall Street bank was number one on the VC list in terms of actual dollars invested, and was the top fi nancial advisor to the target of a merger or acquisition, also measured in dollars. Goldman made 9 venture capital/private equity investments in 2007 worth an estimated US$443m, at an average of just under US$50m apiece. Firms backed included SunEdison LLC, a Baltimore-based PV project developer and fi nancier, and Nordic Windpower, a California fi rm developing a two-blade wind turbine, among others. Goldman also earned the top M&A advisor to a target in 2007 – as a result of a single deal: the US$2.7bn buy-out of Texas-based wind developer Horizon Wind by Energias de Portugal. Goldman also was the seller in that deal.

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In terms of advisors to acquirers in M&A deals, Citi fi nished at the top of the list, having advised buyers on two major transactions. Again, the EDP-Horizon tie-up played a key role with Citi advising EDP on the deal. The bank also advised Sumitomo Chemical on its US$285m purchase of Cambridge Display Tech., a UK-based fi rm commercialising polymer light emitting diode and dendrimer technologies.Credit Suisse was the number one lead manager of clean energy company equity off erings on the public markets, both in terms of total dollars and deals. The bank underwrote 13 IPOs, secondary off erings, and convertibles off erings with a total market value of US$2.8bn in 2007. Top deals included the IPO of Iberdrola Energias Renovables, which raised US$7.2bn (Credit Suisse was one of several banks to co-manage that off ering). Other public market deals included Norway-based PV cell maker REC Group’s US$465m secondary off ering, and California-based PV module maker SunPower’s US$399m convertible off ering.The majority of funds invested in clean energy in 2007 went into the development of projects, such as wind farms or solar thermal electric generating projects. The top arranger of fi nancing for these for 2007 was Germany’s HSH Nordbank, which was involved in 34 projects worldwide. The bank helped line up fi nancing totalling an estimated US$2.8bn.

The complete league tables, including the methodology used to collect the data, can be found at http://www.newenergymatters.com/UserFiles/File/League_Table_2007_Final.pdf.

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22 renewable energy focus May/June 2008

one considered feasible by those present. “The smart money absolutely

anticipates a change in the regulatory environment in the US. I believe we

will see consistent policy that will support investment,” said one senior

investor.

Day one – industry developments and policy

The Summit then moved to the fi rst of its panel debates, exploring the

challenges facing clean energy’s growth. Highlights included fragmenta-

tion in carbon pricing, a lack of joined-up renewable energy policy,

competition from other energies (including nuclear and clean coal) and

bottlenecks in everything from silicon to executive talent.

Nuclear energy threatened to take centre stage on the second panel

debate, Developments in Energy Infrastructure. If decommissioning

continues at its current rate, nuclear energy’s share of the global energy

mix will fall from around 15% currently to just 2% by 2020. Nuclear’s

proponents argued that there is a huge diff erence between old nuclear

and new nuclear; however, others favoured energy effi ciency and new

forms of heat generation as exciting (and nearer-term) opportunities.

In the third session, on Eff ective Policy, Abu Dhabi’s futuristic green city,

Masdar, was showcased as an example of how renewable energy initia-

tives can be jump-started with the right political support. Masdar, a

walled city designed by Foster & Partners, will be the world’s fi rst zero-

carbon, zero-waste, car-free city.

Overall, the policy outlook looks promising, with a new US Administration

expected to show more leadership on clean energy. It was striking that

policymakers were upbeat and committed, while investors and fi nanciers

were less cheerful, reporting choppier market conditions in 2008 and

increased competition from other energies.

Awards dinner

An atmosphere of anticipation dominated The Awards Dinner, held at

the Wallace Collection. Goldman Sachs took two awards, for venture

capital investment (US$443 million invested in 2007) and as top fi nan-

cial advisor to an M&A target. Citigroup topped the M&A acquirer

advisor table, while Credit Suisse was the top lead manager of clean

energy public market transactions, in terms of both number of deals

and dollars raised. In 2007, the bank underwrote 13 IPOs, secondary

off erings and convertibles with a total market value of US$2.8bn. Good

Energies was the leading venture capital investor, with 20 deals worth

US$100.6mn completed in 2007.

This year, for the fi rst time, New Energy Finance included the burgeoning

carbon credits market in its rankings, supported by its New Carbon

Finance team. EcoSecurities led the deal table, with 402 carbon off -take

projects, while Natsource brokered the largest number of contracted

credits – 101 million tonnes of CERs.

“We were extremely pleased that so many investors, lenders and others were

so forthcoming,” said Michael Liebreich. “As a result, these league tables present

the most complete snapshot of the top players in clean energy in 2007.”

Day two – fi nance and carbon markets

The second day kicked off with a high-powered debate on private equity,

which agreed that now was not an easy time for renewable energy companies

to go public – although there was disagreement over how this might aff ect the

renewables industry. Private equity fi nanciers argued that there was plenty of

later-stage private fi nancing available, while investment bankers believed that

the right companies could still go public in spite of the downturn.

The next session focused on carbon markets. Panellists suggested that if

and when a true global carbon trading market is established, it could be

larger than the current global oil market. There was also talk of Europe

taking the lead in forming an institution that could oversee such a market.

In his keynote speech, Lord Browne, former BP ceo and now the European

managing partner of Carlyle Group/Riverstone Holdings, warned that

there was a lot of work to be done on the regulatory framework before

technologies such as carbon capture and storage (CCS) made a serious

dent in CO2 emissions.

Lord Browne highlighted the many barriers that stood in the way of low

carbon technologies, including the complex approval process, subsidies

for conventional energy and general resistance to change. “Big companies

will do their own thing. No company will do something that is not their

core purpose unless they are regulated to do it.”

Lord Browne, who described the Summit as “the new Davos”, believes that

CCS is closer than some other technologies such as nuclear fusion.

However, he argued that without a developed regulatory framework that

would see large demonstration projects, progress would be slow. “Like

any innovation, there needs to be something specifi c in place to inno-

vate,” he said.

The Summit was very well-received by delegates, who praised the open

format and the speakers’ calibre. One described the event as “really

exceptional. It was a pleasure and an honour to take part. I learned a

great deal and met all sorts of interesting people – what more can one

ask?” And in the words of a senior investor: “In over 25 years of attending

endless fi nance conferences all over the planet, I can honestly say that

this was by far the best I have ever attended.”

Panel discussion at the New Energy Finance summit (image courtesy of Lawrence White/New Energy Finance)

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24 renewable energy focus May/June 2008

NEX Output: to 28 March 2008 (best and worst 20 performing companies)

No. Name Country Primary Sector Exchange Ticker Local Currency Market Cap USD % Change

43 Japan Wind Develop-ment Co. Ltd.

Japan Renewable - Wind Tokyo 2766 JPY 456 65.8%

64 Sanyo Electric Co. Ltd. Japan Power Storage Tokyo 6764 JPY 3969 49.3%

15 Capstone Turbine Corp.

US Energy Effi ciency NASDAQ NMS CPST USD 306 41.6%

57 Power-One Inc. US Energy Effi ciency NASDAQ NMS PWER USD 269 34.9%

25 Energy Conversion Devices Inc.

US Renewable - Solar NASDAQ NMS ENER USD 1192 29.2%

36 GS Yuasa Corp. Japan Power Storage Tokyo 6674 JPY 1044 28.5%

31 First Solar Inc. US Renewable - Solar NASDAQ NMS FSLR USD 17608 25.8%

16 Centrotec Sustain-able AG

Germany Energy Effi ciency XETRA CEV EUR 353 25.7%

13 BYD Co. Ltd. Hong Kong Power Storage Hong Kong 1211 HKD 1034 25.1%

54 Plug Power Inc. US Hydrogen & Fuel Cells NASDAQ NMS PLUG USD 291 21.5%

67 Sechilienne Sidec France Renewables - Biofuels & Biomass

EN Paris SECH EUR 2101 19.1%

56 Power Integrations Inc.

US Energy Effi ciency NASDAQ NMS POWI USD 867 18.8%

4 American Supercon-ductor Corp.

US Energy Effi ciency NASDAQ NMS AMSC USD 965 16.2%

14 Canadian Hydro Developers Inc.

Canada Renewable - Other Toronto KHD CAD 794 16.0%

34 Gamesa Corporacion Tecnologica S.A.

Spain Renewable - Wind Madrid GAM EUR 11220 15.7%

5 Anhui BBCA Biochem-ical Co. Ltd. A

China Renewables - Biofuels & Biomass

Shenzhen 930 CNY 1272 14.6%

12 Brasil Ecodiesel Industria e Comercio de Bioc

Brazil Renewables - Biofuels & Biomass

Sao Paulo ECOD3 BRL 333 13.0%

76 Theolia France Renewable - Wind EN Paris TEO EUR 1147 12.4%

42 JA Solar Holdings Co. Ltd. ADS

China Renewable - Solar NASDAQ NMS JASO USD 2888 12.1%

51 Novozymes A/S Series B

Denmark Renewables - Biofuels & Biomass

Copenhagen NZYM’B DKK 4872 10.9%

45 LDK Solar Co. Ltd. ADS

China Renewable - Solar NYSE LDK USD 3029 -17.8%

62 Roth & Rau AG Germany Renewable - Solar XETRA R8R EUR 502 -18.1%

72 Solon AG fuer So-lartechnik

Germany Renewable - Solar XETRA SOO1 EUR 842 -19.1%

38 Hansen Transmission UK Renewable - Wind London HSN GBP 2559 -20.0%

53 Pacifi c Ethanol Inc. US Renewables - Biofuels & Biomass

NASDAQ NMS PEIX USD 196 -20.1%

82 Verenium Corp. US Renewables - Biofuels & Biomass

NASDAQ NMS VRNM USD 205 -20.7%

79 VeraSun Energy Corp. US Renewables - Biofuels & Biomass

NYSE VSE USD 645 -20.9%

33 FuelCell Energy Inc. US Hydrogen & Fuel Cells NASDAQ NMS FCEL USD 438 -23.4%

26 Energy Develop-ments Ltd.

Australia Renewables - Biofuels & Biomass

ASX ENE AUD 311 -23.6%

40 International Rectifi er Corp.

US Energy Effi ciency NYSE IRF USD 1526 -24.4%

74 Suntech Power Holdings Co. Ltd. ADS

China Renewable - Solar NYSE STP USD 6146 -25.1%

30 Evergreen Solar Inc. US Renewable - Solar NASDAQ NMS ESLR USD 918 -25.4%

18 Conergy AG Germany Renewable - Solar XETRA CGY EUR 688 -27.2%

86 Zoltek Cos. US Renewable - Wind NASDAQ NMS ZOLT USD 899 -27.6%

70 Solaria Energia y Medio Ambiente S.A.

Spain Renewable - Solar Madrid SLR EUR 1837 -29.2%

77 Ultralife Batteries Inc. US Power Storage NASDAQ NMS ULBI USD 175 -32.3%

17 Comverge Inc. US Energy Effi ciency NASDAQ NMS COMV USD 216 -40.5%

80 VERBIO Vereinigte BioEnergie AG

Germany Renewables - Biofuels & Biomass

XETRA VBK EUR 138 -41.4%

7 Aventine Renewable Energy Holdings Inc.

US Renewables - Biofuels & Biomass

NYSE AVR USD 217 -45.9%

27 EnerNOC Inc. US Energy Effi ciency NASDAQ NMS ENOC USD 207 -67.4%

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